Developing great client relationships
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Client relationships:View these slides to learn why keeping great relationships with the right clients is good for them and for the value of your business. A balanced portfolio of quality clients with relationships at senior levels, supported by well-managed account plans, showing growing revenue streams, is highly desirable both for the firm and for potential buyers. Learn how to identify your ideal clients and how to nurture and grow those clients, reducing risk and ensuring you maintain a long-term, mutually beneficial client base.
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Developing great client relationships
- 1. Confidential© Equiteq 2015 equiteq.com Growing equity, realizing value 8 Levers Webinar Series Client Relationships Webinar
- 2. Confidential© Equiteq 2015 equiteq.com Sell more of what you do to people you already know
- 3. Confidential© Equiteq 2015 equiteq.com 3 When we look at a consulting firm we use our Equity Growth Wheel Market Proposition Intellectual Property Quality of Fee Income Sales & Marketing Process Consultant Loyalty Client Relationships Sales & Profit Growth Management Quality Equity Growth Wheel
- 4. Confidential© Equiteq 2015 equiteq.com Most sales effort and revenue should be prioritised on current clients and current services 4 20% 60%20% Proportion of effort by service and client Current Current New New Services Clients
- 5. Confidential© Equiteq 2015 equiteq.com The basis for developing good client relationships is a simple account management process 5 • All your existing accounts need to be examined by the client account management process • Once you have decided which clients to focus upon, account plans need to be created and then managed 1. Classify clients 2. Create account plans 3. Manage account plans Update Sales Pipeline Contribute to Budget Process
- 6. Confidential© Equiteq 2015 equiteq.com There are four account types and each one requires a different management approach 6 Account Type Typical Characteristics Typical Revenue per Account Account Management Approach Key High value, possibly annuity account, providing a significant contribution to the revenue stream, now and in the foreseeable future >10% of total Focus Emerging Medium value account with the potential to develop into a strong revenue stream 1-10% of total Develop Transaction Relatively low value account which provides sporadic opportunities, but little future growth potential 1-10% of total Maintain Exit Low value, possibly loss-making, with no growth potential <<1% of total Monitor
- 7. Confidential© Equiteq 2015 equiteq.com It is important to classify clients so that the appropriate level of account management can be applied 7 1. Map accounts onto the Client Growth Matrix using profitability data from last 12 months 2. Complete Pareto analysis based on revenue over last 12 months Hi Lo CurrentProfitability Growth Potential HiLo 1 2 3 10 6 9 13 8 7 5 4 Client Growth Matrix Client Revenue Pareto Key Emerging/Transaction Poss. Exit 14 11 12 Key Emerging Transaction Exit
- 8. Confidential© Equiteq 2015 equiteq.com The key account team meets to create the account plan 8 1. Summarise client business 2. Summarise relationship with client 3. Define client needs 4. Create stakeholder plan 5. Complete SWOT analysis 6. Identify opportunities for additional work 7. Articulate your account objective 8. Create the plan
- 9. Confidential© Equiteq 2015 equiteq.com Stakeholder Name Stakeholder Objectives Management Strategy Messages Needed Action Responsible Make sure the account plans are simple to follow and administer 9 Opportunity Customer Potential Value Action Responsible Complete by date Sales Opportunities Plan Stakeholder Plan
- 10. Confidential© Equiteq 2015 equiteq.com For your Client Relationship homework try these Start, Stop, Continue strategies 10 Classify your accounts and appoint managers for the key onesStart Stop Continue Updating your sales pipeline with forecasts from your client accounts Stop spending all your time in the key accounts on delivery only: make time for account management. Stop spending any senior management time on the exit accounts
- 11. Confidential© Equiteq 2015 equiteq.com Please make use of our free thought leadership material 11
- 12. Confidential© Equiteq 2015 equiteq.com Growing equity, realizing value UK +44 (0)203 651 0600 USA +1 (212) 256 1120 Singapore +65 6352 7482 Email info@equiteq.com www.equiteq.com
Editor's Notes
- Pat: Welcome to the third of 8 Webinars in a series covering each of the levers in Equiteq’s Equity growth wheel. Today we’ll be talking about Client Relationships. I’m Pat Webb, a Client Growth Director based in Vancouver and I’ll be your host. I’ll be speaking with Paul Beaumont, another of our Client Growth Directors, and Paul is based in London. I’ll be asking him to give you some insights about what you need to know to nurture your clients in order to grow mutually beneficial long-term relationships, because that’s the best way of guaranteeing future growth. That’ll take about 20 minutes, then in the last 10 I’ll be putting your questions to him. Please post your questions using the control panel on the right hand side of the screen as we go. The question box appears towards the bottom.
- Pat: So, Paul, what’s the most important message about the Client Relationship lever? Hi Pat. You may remember that in the first webinar in this series we talked about the importance of making your market proposition crystal clear, and last week our colleague Shant Yeremian, spoke about increasing sales and profits. Well, your existing clients should know your proposition better than anyone else and the easiest place to grow sales and profits is with people who already understand the benefits you can deliver. This is achieved through outstanding client relationship management. So, the key message, Pat, is to simply sell more of what you do to people you already know by expertly managing those relationships.
- Pat: Ok, let’s quickly remind ourselves of where Client Relationships fit within the overall context of growing and developing your firm, both for growing it now and for making it more attractive to a company wishing to buy the firm in the future. Those of you who have heard our previous webinars will be familiar with this picture; for those of you who are joining us for the first time, this picture represents a high-level view of all the operational issues that an acquirer of a consultancy will look at to identify how risky it would be for them to buy the firm. There is a benchmarking tool that sits beneath this structure which we have used to evaluate nearly 400 firms in our M&A advisory work. So, lets zoom in now Paul, can you give us a specific look at the client relationship lever? Paul: Certainly. I’ve already said that the key message here is that you should look to sell more of what you do to people you already know. Selling to people who already know you – ‘farming’ – is much easier and more cost effective than selling to people who don’t know you, which is ‘hunting.’ We’ll come back to ‘hunting’ in the sixth webinar on the sales and marketing process. You need both, of course, but today we’re going to concentrate on how to become better farmers. The benefit of taking this approach is that effective account management reduces customer churn and increases the lifetime value of a client.
- Paul – explain the 2x2 matrix! Figures are indicative, don’t give them more precision than they deserve. Let me start in the top right-hand quadrant. This is where you need to be farming (that’s why it’s green!). The resources you need to invest here are those of your account managers, and above those, the senior leadership team. Similarly, in the quadrant in the bottom right-hand corner, the same group of people – your account managers and senior members of the management team – will be responsible for selling new services to existing clients. Much of your marketing budget will be deployed in the top left-hand quadrant trying to capture new clients and deliver your proven, current services to them. (Remember, this is the box where you will be hunting) We would encourage you to limit your activity in the bottom left-hand quadrant, which is selling new services to people you do not know. Of course, that’s exactly what you may be doing if you’re a start-up, or if you are testing new IP. It’s not impossible to operate in this quadrant but it is difficult! The point is you don’t want to end up here by accident. Pat: OK. We’ve understood that this is all about farming, so exactly where do you start?
- Paul: The basis for developing good client relationships is a simple account management process. In the next few slides we’ll be looking at these elements in more detail but here I just want to give a quick overview. Box 1 says that you have to classify your clients. Some of your clients will be more important to you now and in the future, and it’s crucial to identify these. The second box tells you to create account plans for those important accounts in sufficient detail to manage them successfully. You won’t be able to do this for all of your clients, which is why you start by segmenting, or classifying them. The third box says that once you have created the account plans you need to manage them in a simple and effective way that gives you control of what you’re doing without sinking you in bureaucracy. You’ll notice that the process feeds into two more boxes at the end: Update Sales Pipeline and Contribute to Budget Process. What we mean by that is that all the information coming out of the account plan, in terms of future opportunities, should be captured in your sales pipeline so that you can make resourcing decisions that are as accurate as possible; and, of course, when you create the revenue budget, you should inform it with a grass-roots understanding of what you are likely to sell in the account next year. Pat: Paul, you’ve made a really critical point so I think it’s worth an extra minute to underline it. Revenue and profit goals get cascaded down but when account plans are rolled up, the numbers don’t align, there’s a gap. How do you ensure the account managers get targets they really believe they can achieve, and that they then stick to the plans they create in order to meet those targets? Paul: Sure. Let’s start with the most basic thing: the account managers need to know what the revenue targets actually are for the organisation, and how their account will contribute to that. Now, if they know, as a result of their excellent account management, what they are likely to sell next year, they can compare the target with their own expectation of what is achievable. The reconciliation of the two becomes an iterative process until both the account manager and the leadership team are happy they have realistic, achievable growth targets. Maintaining the sales pipeline ensures there is a clear line of sight between the targets and what is actually being achieved as the year progresses. So, if the performance drops below the target then the account manager needs to know that and needs to start to change how she spends her time. It may be that she needs more support from the head of sales or from other members of the leadership team. Their job, after all, is to make sure she succeeds! Pat: Great. Thanks for that. So, if that’s the overview, can you take us through each step?
- Paul: Remember, the first step is to classify the accounts and, in this example, I’ve shown four different account types. You don’t have to use these exact terms, and you might have slightly more or fewer classifications, but it really helps to put them into different groups because each one requires a different management approach. Let me take you through my example: [NOTE: talk through details of table on slide] KEY: READ TYPICAL CHARACTERISTICS. Then: Accountability for sales and delivery lies with an account manager, supported by the head of sales and an account team. Account teams should meet every 2-3 months to review plans and performance. EMERGING: READ TYPICAL CHARACTERISTICS. Then: these accounts are managed by a smaller account team, led by the account manager. The head of sales should be called in if a large opportunity is being pursued. The account team should meet every 4-6 months to review performance. TRANSACTION: READ TYPICAL CHARACTERISTICS. Then: these accounts are managed by one person who will be responsible for reviewing the performance of the account as required. EXIT: READ TYPICAL CHARACTERISTICS. Then: Increase prices to more profitable levels when opportunities arise; or decline Pat: I can see the value of this classification, but it sounds like it might be complicated to do. How do you do it?
- Paul: As with all analysis, Pat, it needs to be at an appropriate level that guides you to an answer that is good enough, without searching for a degree of precision that is not justified. This is not something that should take you days to do. Let’s have a look at the 2x2 matrix on the left (because we’re consultants we see the entire universe through 2x2 matrices, but this one is different to the one I showed you earlier, which is why it’s in a different colour!). The two axes are ‘current profitability’ and ‘growth potential.’ You can complete the matrix as a leadership team exercise: on post-it notes, write down the name of the clients and the profitability you have earned from them in the last 12 months (in £s or $s). Agree between you the growth potential of each client by considering the opportunity to repeat your services and your degree of saturation. Then, map the post-it notes onto the matrix. Those of you who are following the colour scheme will notice that it’s the same as the previous slide, so the top right hand quadrant is where the key accounts are clustered and this is where you need to become expert farmers. Some management time will also be required in the lighter green boxes, but please don’t spend any of your precious time on clients in the blue, bottom left-hand box. I started this by implying you should avoid paralysis by analysis but another simple, supporting diagnostic you can carry out is to plot revenue by client as shown by the Pareto chart on the right hand side. The classification of the four account types will roughly map onto the Pareto as shown and this can support your conclusions and also be used to communicate and inform the investment of the organisation’s time. Pat: This is a really key message, isn’t it, Paul: identify and then spend your time in the key accounts. So, what is the process for managing them?
- Paul: Yes, you’re right and I’m glad you asked me that question, Pat. From now on we’re only going to talk about the key accounts. To get momentum into the account planning process and to maintain focus, you can start it with a really engaging, dynamic workshop with the people in your business who work with that particular client. Now, preparation is the key to a successful account meeting: The account manager must come to the meeting ready to present items 1 and 2. The whole team must spend time thinking about items 3 to 6, at the very least. [CALL OUT WHITE SPACE ANALYSIS FOR STEP 6 – ref QoF] The account manager should be cognisant of business targets when thinking about item 7. This is where you have to write down in a sentence or two what you want to achieve with this account. When doing this you need to be aware of how your revenue and profitability from this client fits into the overall business plan but, more than this, you want to articulate what will be the result for the client of working with you. For example, “We will be the lead advisor to the client on supply chain design, resulting in reducing their inventory by 20% and improving their service to 99%, with an anticipated revenue for us of $1m p.a.” Pat: Paul, would you ever envisage that a client would come to an account planning meeting? Paul: Certainly, especially as you are very likely to have a strong relationship with them. You will obviously have to be careful not to share commercially sensitive information with them (like how much money you have made from them) but many clients will be delighted to work with you to identify how you can help them, how much more benefit you can deliver, and how you’re going to ring-fence resources for them. They can even help you articulate your account objective. Pat: I think it would be brilliant if you can do your account planning with the client, but whether you can or not, how do you make sure that the plans don’t end up gathering dust on the shelf?
- Paul: Pat, the answer is to keep the plans really simple. If you look at the slide you’ll see we have a sales opportunity plan and a stakeholder plan. In each case, focus on completing the next actions for the priorities: don’t try to boil the ocean. Make sure everyone on the team knows which three items they will complete this month. It all comes down to making sure you know who is going to set the sales meetings and then getting on and actually setting them! Pat: Would a potential buyer of your firm want to see these account plans? Paul: Yes, because it would give them confidence in your future forecast. They would want to see the plans, they’d want to understand the level at which you are working in your clients, the type of client you have, the longevity of the relationships, and how you manage all of your client data in, for example, a good CRM system. Pat: I can see how crucial client relationship management is to both growing the business and, ultimately, to selling it. Now let me ask you some of the questions that have come up from our listeners.
- Yes! Three things: Start Stop Continue Pat: Paul that’s all we’ve time for